The Risk Controllers: Central Counterparty Clearing in Globalised Financial Markets

16

Post-trade Policy in Europe

16.1 FRAGMENTED REGULATION: THE EXAMPLE OF LCH.CLEARNET

When LCH and Clearnet sealed their merger at the end of 2003, the regulators’ arrangements for the LCH.Clearnet Group put in stark relief the absence of a single market in Europe for post-trade services.

Despite the launch of the euro in January 1999 and the Financial Services Action Plan (FSAP) later that year, a dozen or so regulators had a say in the regulation and oversight of the newly formed group.

Although the group was a UK-registered limited company, its lead regulator was the Commission bancaire (Cb) of France. The Cb held this role because the LCH.Clearnet Group was a financial holding company (a compagnie financière) whose subsidiaries included LCH.Clearnet SA, a limited purpose bank incorporated in France, and the one and only credit institution in the group.

SA's banking status also meant involvement in its supervision by France's Comité des Établissements de Crédit et des Entreprises d'Investissement (CECEI), the body responsible for authorising banks in France, and the Banque de France, the French central bank. As a clearing house, SA was regulated by the Autorité des Marchés Financiers (AMF), the French financial markets regulator.

In the UK, the FSA, the AMF's counterpart, authorised and regulated LCH.Clearnet Ltd, the Group's London-based CCP, as a Recognised Clearing House (RCH), meaning that it was not restricted in terms of what products it could clear or how those products ...